Baker Hughes, a GE company Investor Book

Baker Hughes, a GE company

Investor Book

March 2019

© 2019 Baker Hughes, a GE company - All rights reserved

www.bhge.com

NYSE: BHGE

[email protected]

+1 (281) 809-9088

http://www.bhge.com/

mailto:[email protected]

© 2019 Baker Hughes, a GE company - All rights reserved2

This presentation (and oral statements made regarding the subjects of this release) may contain forward-looking statements within the meaning of

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a “forward-

looking statement”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “project,” “foresee,” “forecasts,” “predict,” “outlook,”

“aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify

forward-looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking

statements. These forward-looking statements are also affected by the risk factors described in the Company’s annual report on Form 10-K for the

annual period ended December 31, 2018 and those set forth from time to time in other filings with the Securities and Exchange Commission (“SEC”).

The documents are available through the Company’s website at: www.investors.bhge.com or through the SEC’s Electronic Data Gathering and

Analysis Retrieval (“EDGAR”) system at: www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

The Company presents its financial results in accordance with GAAP which includes the results of Baker Hughes and GE Oil & Gas from the

transaction closing date of July 3, 2017. However, management believes that using additional non-GAAP measures will enhance the evaluation of the

profitability of the Company and its ongoing operations.

DisclaimerForward-looking statements


BHGE has a broad solutions portfolio & fullstream capability

BHGE … we are fullstream

UPSTREAM MIDSTREAM DOWNSTREAM INDUSTRIAL

Drilling & Evaluation

Completion & Production

Subsea

LNG

Pipeline

Storage

Refining

Petrochemical & Fertilizer

Processing

Power & Renewables

Controls & Sensing

DIGITALSoftware, advanced analytics, controls & sensing, and asset performance management

~$23B revenue ~66K employees >120 countries *

3

*2018


$11.6B* $2.6B* $6.0B* $2.6B*

• Leader in well construction &

production

• Strong global presence

• Focus on execution, reliability

& cost

BHGE … an unparalleled portfolioWe deliver across the energy value chain through our 4 market-leading product companies

• Leading subsea production &

flexibles portfolio

• Strong execution & technology

pipeline

• Collaborative partnerships &

new models

• Best in class sensing &

measurement technology

• Differentiated software

offerings

• Leader in critical inspection

technology

• Technology leader in LNG &

upstream production

• Significant installed base

• Proven track record in the

most critical projects

OILFIELD SERVICES

OILFIELD EQUIPMENT

TURBOMACHINERY & PROCESS SOLUTIONS

DIGITAL SOLUTIONS

*2018 revenue


MARKET-LEADING

PRODUCT COMPANIES

INTEGRATED

SERVICE MODULES

FULLSTREAM

SOLUTIONS

50

Reduction in the cost

of doing business

Increase margin and competitiveness

by reducing product and service cost

50

Improvement in productivity

Create value through integrated

equipment and service technologies

50

Increase in industrial yield

Drive value creation through

outcome-performance solutions

Our long-term strategy is aligned with shareholder priorities

5

Focus on reducing cost, integrating solutions and aligning incentives with customers


At BHGE we are committed to social responsibility

6

Core elements embedded in how we operate Improving Health, Safety, and Environment

Driving carbon footprint reduction

Net-zero BHGE CO2

emissions by 2050While investing in our portfolio of advanced technologies to enable customer’s reduction

“Perfect HSE days” achieved in ‘18 … up 20% year-over-yearDays without a recordable injury, vehicle accident, and serious environmental spills or releases

153

• Empower people in a culture of inclusion and support

communities to be vibrant places to live and work

• Stewards of the environment, inventing technologies

for reduced impact and using resources wisely

• Grounded on sound governance, effective policies and

guidelines, and transparency

People Planet Principles

Leading the energy transition

I AM Responsible for a Perfect HSE Day


BHGE is a differentiated investment opportunity

BHGE portfolio spans the value chain Financials ($B)

1

2

3

Balanced portfolio

• Exposure across the value chain

• Global presence … ~70% revenue outside NAM

Multiple growth trajectories

• Leader in LNG and gas … FIDs accelerating in ’19

• International growth; offshore recovery beginning

Deliver value through-the-cycle

• Capture growth opportunities … expand margins in OFS

• Long-cycle businesses recovering

Upstream

~60%LNG/Midstream

~25%

Downstream

~5%

Other

~10%

2018 revenue %

Differentiators

$22.9 $21.8 $22.9

$20.9 $21.8 $23.9

2016 2017 2018

Revenue

Orders4%

(5)%

Adj. Op Income (non-GAAP)

$0.4 $0.9 109% $1.4 62%

Adj. Op Income % 1.8% 3.9% 6.1%

D&A n/m $1.5 n/m $1.5 (1)%

10%

5%

V% V%

7

2016 and 2017 financials are on a

combined business basis (non-GAAP)


Gaining share:

• Won large-scope integrated services for Marjan field in Q3’18

• Awarded major well services contract in Saudi Arabia in Q4’18

• Formed ADNOC Drilling JV for conventional & unconventional

activities in Q4’18

• Won largest-ever drilling contract in Qatar in Q3’18

• Awarded integrated contract from Equinor in Q2’18

• Awarded Kinder Morgan ESP contract in Permian Basin in Q1’18

Improving margins:

• Expanded operating income margins by ~400bps in ‘18

• Executing on synergies & optimizing service cost

Oilfield Services (OFS)

Financials ($ in billions) Business overview

Recent highlights

• ~100-year legacy, strong technology

• Leader in well construction

• ~40% North America / ~60% International revenues

• Strong positions in Artificial Lift and Chemicals$10.2 $10.4

$11.6

2016 2017 2018

2%

Op Inc. $(0.8) $0.3 n/m $0.8 169%

Op Inc. % (7.5)% 2.8% 6.8%

RevenueV% V%

12%

8




2Q'17 2017 20182Q'17 2017 2018

Re-gaining share in OFS remains a top priority

OFS revenue outgrowing rig count Focused on international growth

Rig count indexed growth since 2Q’17

OFS revenue indexed growth since 2Q’17

International rig count indexed growth since 2Q’17

OFS international revenue indexed growth since 2Q’17

+15%

+21%

+6%

+19%

9

BHGE OFS growing faster than the rig count … core product lines, key markets performing well

Source: BHGE rig count


$3.5

$2.7 $2.6

$2.2 $2.5 $3.1

2016 2017 2018

Oilfield Equipment (OFE)

• Leading subsea production systems & flexible pipes

• Collaborative partnerships & new models

• New Subsea Connect and Aptara™ TOTEX-Lite Subsea System

• Last 4-year revenue split:

• Won 34 trees for ONGC’s 98/2 project in India in Q4’18

• Awarded first BOP in Asia since 2014 in Q3’18

• Awarded 13 trees for Chevron’s Gorgon Phase 2 in Q2’18

• Won 8 trees for Phase 2 of Posco Daewoo’s Shwe field in Q2’18

• Won FEED for BP Tortue/Ahmeyim Development in Q1’18

• Commercialized composite technology for flexible risers

Financials ($ in billions) Business overview

Recent highlights

Op Inc. $0.3 $0.0 (91)% $0.0 (100)%

Op Inc. % 8.6% 1.0% 0.0%

RevenueOrders

15%

(25)%

23%

(1)%

V% V%

10

Subsea Production

Systems & Services

~45%

Flexible Pipe Systems

~20%

Surface Pressure Control

~20%

Subsea Drilling Systems

~15%




Turbomachinery & Process Solutions (TPS)

• Technology leader in LNG & upstream production

• Proven track record in the most challenging projects

• Significant installed base … $13B service backlog (RPO)

• ~40% Equipment / ~60% After-market Services revenue in 2018

• Last 4-year equipment revenue split:

• Awarded liquefaction trains for Golden Pass LNG in Q1’19

• Won turbomachinery equipment for LNG Canada in Q4’18

• Awarded Corpus Christi LNG Train 3 liquefaction system in Q2’18

• Selected for major LNG project in Arctic region in Q4’18

• Providing gas turbine generators for Johan Castberg & Mero FPSOs

• Awarded compression equipment for Sepia FPSO

• Won gas compression for Haradh and Hawiyah gas fields

• Awarded power generation equipment for Halfaya oilfield

Financials ($ in billions)

Op Inc. $1.1 $0.7 (37%) $0.6 (7%)

Op Inc. % 15.9% 10.6% 10.3%

$6.7$6.3 $6.0

$5.9 $5.9

$6.6

2016 2017 2018

1%

(6)%

Business overview

Recent highlights

12%

(4)%

V% V%RevenueOrders

11

On & Offshore Production

~40%

LNG/Midstream

~30%

Pipeline & Gas Processing

~10%

Refinery & Petrochemical

~15%

Industrial

~5%




Digital Solutions (DS)

• Achieved significant operational improvements together with BP

through BHGE Plant Operations Advisor

• Formed partnership with NVIDIA to further advance image

recognition technology in the oil and gas industry

• Formed leading pipeline inspections business

Financials ($ in billions)

Op Inc. $0.3 $0.3 (2%) $0.4 22%

Op Inc. % 12.9% 12.7% 15.0%

$2.5 $2.5 $2.6

$2.6

$2.9

$2.6

2016 2017 2018

13%

(0)%

Business overview

Recent highlights

• Best in class measurement & sensing technology

• Differentiated software offerings

• Leader in critical inspection technology

• Last 4-year revenue split:(11)%

3%

V% V%RevenueOrders

12

Bently Nevada ~25%Condition monitoring &

diagnostics

Pipeline inspection &

commissioning ~25%Inspection Technologies ~20%

Imaging, inspection, NDT

Control Solutions ~15% Control systems & security

Measurement & Sensing ~15% Temperature, flow, pressure sensors




2018 progress on strategic priority to increase margin rates

Delivering on our priorities in 2018

Continue synergy execution

• $0.8B in 2018 … $0.1B ahead of plan

• $1.2B in 2019 … $1.0B of cost, $0.2B of revenue

• $1.6B in 2020 … $1.2B of cost, $0.4B of revenue

Continue to expand OFS margins … close gap to

peers

• Optimize service delivery cost

• Increase asset utilization

• Product cost out

TPS … $0.2B annualized cost out

• Rationalizing structure

• Lower product and service costs … from product design

to manufacturing to installation

Clear plans in place for 2019 and beyond

14.3%

11.8%

2H'17 2018

OFS Operating Margin

BHGE SG&A % of Revenue

1

2

3

(7.5%)

2.8%

6.8%

2016 2017 2018

13




0%

1%

2%

3%

4%

2016 2017 2018

Preparing BHGE for a bright future … we continue to invest in leading technologyR&D % of revenue … continuing to invest

8,000+engineers & scientists

10+global technology centers

~2,700patents registered in 2018

$700M2018 R&D spend

Building on a strong technology heritage

14

Source: company filings

*Combined business basis


2018 … continued disciplined capital allocation & progress on improving working capital processes

Days Sales Outstanding -c)

Processes improving … more work to do2018 highlights

• ~90% FCF conversion over time

• CAPEX up to 5% of revenue

• Return 40-50% of net income to shareholders

• Maintain investment grade rating – currently A- / A3

Focus remains unchanged Inventory Turns -c)

10995

80

4.04.4

4.9

2016 2017 2018

CFOA $1.8B

Net Capex $0.5B (2.3% of revenue)

FCF (non-GAAP) $1.2B

Dividends: $0.8B

Stock Buyback: $2.5B (VWAP: $25.70/sh)

Shares outstanding -a) Class A: 514.9M; Class B: 521.5M

Net Debt (non-GAAP) -b) $3.4B

15

(a- Share count as of February 8, 2019 as filed in our 10-K. For most recent share count refer to our latest SEC filings.

(b- Net Debt represents BHGE Debt ($6.3B) less BHGE Cash ($3.0B), both of which exclude cash held on behalf of

GE ($0.7B) as well as the corresponding liability ($0.9B).

(c- Based on 5pt. combined business basis average. DSOs excludes impact from monetization winddown.


Executive incentive compensation metrics

16

Our compensation metrics are aligned to shareholder returns

Revenue Relative return on

invested capital

Relative total

shareholder return

Operating Income

Free cash flow


Short-term financial metrics Long-term performance metrics


• Broad portfolio … multiple growth trajectories

• Differentiated long- and short-cycle businesses

• Significant aftermarket service business

• Sustainable lower-than-peer group capital intensity

• Clear strategy to deliver value to shareholders:

focused on share, margins, cash

• Executive compensation fully aligned … ROIC, TSR

Summary

BHGE is a differentiated investment opportunity


Appendix


Historical financials



Orders TY'16 1Q'17 2Q'17 3Q'17 4Q'17 TY'17 1Q'18 2Q'18 3Q'18 4Q'18 TY'18

Oilfield Services $10,242 $2,397 $2,530 $2,734 $2,765 $10,426 $2,640 $2,866 $3,011 $3,051 $11,569

Oilfield Equipment 2,218 476 797 760 515 2,548 499 1,035 553 1,041 3,129

Turbomachinery & Process Solutions 5,851 1,314 1,556 1,334 1,728 5,932 1,450 1,498 1,552 2,123 6,624

Digtal Solutions 2,588 631 674 918 694 2,916 649 637 629 668 2,583

Total BHGE Orders $20,899 $4,817 $5,557 $5,745 $5,701 $21,821 $5,238 $6,036 $5,746 $6,884 $23,904

Revenue

Oilfield Services $10,181 $2,390 $2,529 $2,661 $2,781 $10,361 $2,678 $2,884 $2,993 $3,062 $11,617

Oilfield Equipment 3,541 716 681 613 650 2,661 664 617 631 729 2,641

Turbomachinery & Process Solutions 6,668 1,644 1,586 1,414 1,651 6,295 1,460 1,385 1,389 1,782 6,015

Digtal Solutions 2,526 573 620 614 717 2,524 598 662 653 691 2,604

Total BHGE Revenue $22,915 $5,324 $5,416 $5,301 $5,799 $21,841 $5,399 $5,548 $5,665 $6,264 $22,877

Segment operating income (loss)

Oilfield Services $(765) $76 $26 $88 $102 $292 $141 $189 $231 $224 $785

Oilfield Equipment 305 50 17 (41) (1) 26 (6) (12) 6 12 0

Turbomachinery & Process Solutions 1,058 252 122 134 157 665 119 113 132 257 621

Digtal Solutions 325 63 62 77 118 320 73 96 106 115 390

Total BHGE segment operating income (loss) $924 $442 $227 $258 $376 $1,302 $327 $387 $475 $609 $1,796

Corporate $(515) $(158) $(107) $(88) $(92) $(446) $(98) $(98) $(98) $(110) $(405)

Merger, impairment, restructuring & other $(1,876) $(244) $(264) $(363) $(395) $(1,265) $(269) $(211) $(95) $(116) $(691)

Operating income (loss) (GAAP) $(1,467) $39 $(145) $(193) $(111) $(409) $(41) $78 $282 $382 $701

Adjusted operating income (Non-GAAP) $409 $283 $119 $170 $284 $856 $228 $289 $377 $498 $1,391

Depreciation & Amortization n/m $351 $344 $380 $425 $1,501 $388 $392 $353 $352 $1,486

($ in millions)


Non-GAAP reconciliations (1/2)

Consolidated results TY'16 1Q'17 2Q'17 TY'17 TY'16 1Q'17 2Q'17 TY'17 TY'16 1Q'17 2Q'17 TY'17

Revenue 13,082 3,064 3,015 17,179 9,833 2,260 2,401 4,662 22,915 5,324 5,416 21,841

Operating income / (loss) (GAAP) 457 86 (66) (284) (1,924) (47) (79) (125) (1,467) 39 (145) (409)

Operating income / (loss) (adjusted) 1,144 207 82 745 (735) 76 37 111 409 283 119 856

Corporate operating loss (375) (120) (70) (370) (140) (38) (38) (76) (515) (158) (107) (446)

Impairment of goodwill - - - - (1,858) - - - (1,858) - - -

Inventory impairment (138) (15) (4) (244) (617) - - - (755) (15) (4) (244)

Restructuring, impairment & other (516) (42) (59) (412) (2,014) (90) (67) (157) (2,531) (132) (126) (569)

Merger and related costs (33) (66) (85) (373) 3,301 (31) (49) (80) 3,267 (97) (134) (453)

Oilfield Services

Revenue 788 212 228 5,881 9,393 2,177 2,301 4,480 10,181 2,390 2,529 10,361

Operating income / (loss) (207) (57) (66) 67 (558) 133 92 225 (765) 76 26 292

Digital Solutions

Revenue 2,086 491 520 2,342 440 82 100 182 2,526 573 620 2,524

Operating income / (loss) 363 84 79 357 (38) (21) (17) (37) 325 63 62 320

Reconciliation of GAAP and combined business basis measures used in this presentation

BHGE-a) Add: Baker Hughes Combined business basis

($ in millions)

(a- TY’16 results include only GE Oil and Gas; TY’17 represents BHGE results

Note: certain columns and rows may not add up due to the use of rounded numbers


Non-GAAP reconciliations (2/2)Reconciliation of GAAP and Adjusted Operating Income/(Loss)

TY'16 1Q'17 2Q'17 3Q'17 4Q'17 TY'17 1Q'18 2Q'18 3Q'18 4Q'18 TY'18

Operating income (loss) (GAAP) $(1,467) $39 $(145) $(193) $(111) $(409) $(41) $78 $282 $382 $701

Inventory impairment and related charges (755) (15) (4) (12) (213) (244) (61) (15) (12) (16) (105)

Goodwill impairment (1,858)- - - - - - - - - -

Impairment and restructuring charges (2,531) (132) (126) (191) (119) (569) (162) (146) (66) (59) (433)

Merger and related costs 3,267 (97) (134) (159) (63) (453) (46) (50) (17) (41) (153)

Total operating income adjustments (1,876) (244) (264) (362) (395) (1,265) (269) (211) (95) (116) (691)

Adjusted operating income (Non-GAAP) $409 $283 $119 $170 $284 $856 $228 $289 $377 $498 $1,391

($ in millions)

2016 and 2017 financials are on a combined business basis (non-GAAP)

Note: certain columns and rows may not add up due to the use of rounded numbers


Baker Hughes, a GE company Investor Book

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